Medicaid Expansion Divides Governors at Virginia Meeting

Governors from around the U.S. began three days of meetings that include discussion of an issue dividing them: whether to expand Medicaid to more low income residents.

Two weeks after the U.S. Supreme Court gave states the power to reject an element of President Barack Obama’s health- care overhaul that calls for expanding the joint state-federal program to 17 million more Americans, the majority of governors have yet to commit.

As the National Governors Association opened meetings today in Williamsburg, Virginia, the state leaders are comparing their plans and debating the economic costs and benefits of an expansion. Republican governors in at least six states say they will reject federal money to provide coverage to more residents, and governors in at least 25 other states said they’re still considering how to proceed.

Virginia Governor Robert McDonnell, head of the Republican Governors Association, said the program may cost the state too much unless it is overhauled. McDonnell said is still considering whether to go along with the plan.

“I don’t think it’s good for my state without reform,” he told reporters today.

At their meeting, governors also are discussing ways to create jobs and encourage economic development.

The Supreme Court decision put governors in the center of an election-year battle over the health-care overhaul, Obama’s signature domestic achievement.

Partisan Divide

Republican and Democratic governors speaking to reporters today described a partisan divide in whether to adopt the program. Republican presidential candidate Mitt Romney has said he seeks to overturn the Patient Protection and Affordable Care Act if he defeats Obama in November election.

“If we don’t get health-care spending under control in this country it will destroy jobs,” said Democrat Peter Shumlin, the governor of Vermont, at a news conference. “We will not be able to compete with countries who are currently stealing our jobs.”

Republicans have led the opposition to expanding Medicaid. Texas Governor Rick Perry and Florida’s Rick Scott both said they won’t expand Medicaid.

Obama’s plan will allow states to open Medicaid programs to those earning as much as 133 percent of the poverty line.

If states don’t expand the program, millions who now lack health insurance would still be uncovered when the law kicks a year and a half from now, without either access to Medicaid or able to receive subsidies that will help those with higher incomes buy health insurance.

New Jeopardy

The federal government will pay the full cost of those newly eligible for Medicaid until 2017, when its share will begin to be phased down to 90 percent. With medical costs consuming a growing share of state budgets, some state leaders say they are still weighing the potential risks of adding to the program.

The federal government will pay $931 billion of the costs through 2022 and states will pay $73 billion, according to the Center on Budget and Policy Priorities, a Washington-based research organization that advocates policies that assist the poor.

Hospitals, especially those that treat many poor people, have warned that failing to expand Medicaid could put them in financial jeopardy. Managed-care companies that focus on Medicaid, including Virginia Beach, Virginia-based Amerigroup Corp. (AGP) and Saint Louis, Missouri-based Centene Corp. (CNC), won’t see as many customers as they had expected if governors opt out of the expansion.

Hunting Pennies

Maryland Governor Martin O’Malley, a Democrat, said expanding Medicaid will save the state money and benefit businesses that are being increasingly squeezed by rising health insurance bills for their workers.

“Instead of throwing money away on ever-more expensive health care, we’re looking forward to being an early implementer so that our businesses can invest in their businesses, help new markets and invest in creating new jobs,” he said.

Not all Democrats are supporting Medicaid expansion. Colorado Governor John Hickenlooper, a Democrat, said he’s still waiting for a financial analysis.

“We haven’t been able to document the savings yet,” he said at a news conference. “This process will take a couple months.”

Nebraska Governor Dave Heineman, the chairman of the National Governors Association, said the issue is at the “top of governors’ minds.” Governors are seeking more information about the program from the Obama administration, he said.

“Ultimately, there are going to be 50 state solutions,” Heineman told reporters.

To contact the reporters on this story: William Selway in Williamsburg at wselway@bloomberg.net; Esme E. Deprez in Williamsburg at edeprez@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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